SportsBizzBuzz

Friday, 31 July 2015

1. Every time
you see A-Rod hit a ball out of the park you wonder whether he is still
juicing?

2. You wonder
what else was on Tom Brady’s cellphone that he had it destroyed? If Brady
has come clean on the texts to the team equipment/training guys what else might
have been on that cellphone?

3. You don't buy
Robert Kraft when he says “the league still has no hard evidence of anybody
doing anything to tamper with the PSI levels of footballs.”

4. For one
minute you believed that Roger Goodell was going to impartially reconsider
re-assessing the League’s own discipline of Brady? Dan Wetzel of Yahoo Sports summed up the whole fiasco perfectly:

"This was the court of
public opinion, and every action, every deal, every day of not owning the story
was just as important as the actual facts around this confusing and mostly
overblown controversy. This was politics, hardcore and ugly. This is how the
NFL operates under Roger Goodell. This is how the NFL has long operated under
Roger Goodell. It's pro wrestling. How the heck Kraft and Brady didn't see
that, how they walked right into the trap and thus never really stood a chance
to make their case is baffling."

5. You could
care less about items 2, 3 and 4?

6. You are still scratching your head about why the "New Jersey Devils For Life” Lou Lamoriello all of a sudden
ends up leaving for the Toronto rebuild project?

7. You haven't yet figured out how Lou Lamoriello (and his 72 year old sets ways of putting
together a hockey team) fits in with the philosophies of Mark Hunter,
Kyle Dubas and Mike Babcock’s for doing the same? The Leafs have gone
from a 4 headed management team (Shanahan, Nonis, Poulin, Loiselle) to well,
er, a 4-5 headed management team (Shanahan, Lamoriello, Mark Hunter, Dubas and
Babcock).

8. You know what
measuring stick they used to conclude here in Toronto that the Pan Am Games
were a “huge success”? Is it because Torontonians were whipped into a
frenzy every day by media reports about Canada’s massive and escalating medal
total (217 total, and 78 Gold)? Did you know that Canada has only once
won more than 20 medals total and only once won more than 4 Gold medals at a
single Summer Olympic Games (if you exclude the 1984 Los Angeles Games where
half the World didn’t show up)?

Wednesday, 22 July 2015

I've had the itch to start writing some short pieces again after taking a couple of years off following the end of the last NHL Lockout. Hopefully the return of the SportsBizzBuzz Blog will be of interest to some of you and provoke some thought. With that said, here we go.

With some fanfare, in late June the NHL finally acknowledged (publicly) that it would explore the possibility of expansion. Only applicants with a $500 million minimum expansion fee need apply. A few weeks later following the NHL imposed deadline for applicants, the NHL was faced with only 2 applicants at that minimum price tag who were also willing to post a non-refundable $2 million application deposit. The NHL issued this curious press release:

"As previously announced, NHL expansion applications were made available to all potentially interested applicants on July 6. Since that date, we have received requests from, and responded by sending applications to, 16 separate groups/individuals.

"The deadline for filing an application and proceeding in the NHL expansion process was last night. We can confirm that we have received two applications: one from Bill Foley for a franchise in Las Vegas, Nevada, and one from Quebecor for a franchise in Quebec City, Quebec.

"Our purpose, in initiating the expansion process in the manner we did, was not only to explore the possibility of admitting new members to the NHL but also, at the outset, to set realistic guideposts to distinguish between bona fide expressions of interest (i.e., those which have at least substantial ownership capabilities and an arena or the realistic possibility of an arena) from those indications of potential interest which were, at best, merely hopes or aspirations. Apparently, only Mr. Foley and Quebecor have the confidence in their ability to secure an arena and suitable ownership capability to move forward with this process.

"We now intend to focus exclusively on the two expansion applications that have been submitted in accordance with the previously announced process. The process we have outlined for qualified applicants includes at least two more stages of documentation submission. We will provide no further updates until there is something substantive to announce."

Which of the following conclusions can one draw from this press release and the fact that only 2 potential applicants have come forward this far:

1. A serious investor with $500 million available to invest knows he can make a better return on that investment in something other than an NHL expansion franchise (not to mention the hundreds of millions more needed to build an NHL ready arena).

2. Bill and Gary were left at the altar by one or more potential investors and once the dust settles "have some splainin to do" to 30 NHL owners.

3. Las Vegas is a step closer to becoming an NHL city - with all the potential warts that a southern, gambling mecca, non-traditional NHL market, desert community brings with it. Think "Phoenix"!

4. $1 Billion divides nicely 30 ways.

5. It ain't over till its over and other interested applicants could still come forward.

Wednesday, 16 January 2013

"I always turn to the sports section first. The sports section records people's accomplishments; the front page nothing but man's failures." - Earl Warren, the late former Chief Justice of the U.S. Supreme Court.

I often cite this quote for why I love sports so much. Admittedly, over the last several years, it is becoming harder and harder to distinguish the front page from the sports section. The past several days has had no less than 4 stories to make it hard for even the most idealistic of us sports fans to adhere to Warren's famous words:

First, Lance Armstrong purportedly will come clean on doping allegations in an interview with Oprah Winfrey to be broadcast tomorrow. Armstrong's legendary success in the Tour de France has inspired a generation of cyclists. He became a brand unto himself, enabling him to parlay his cycling success into one of the most well known athlete produced philantropic foundations - Livestrong - giving millions of cancer patients hope and inspiration. Unfortunately, he is nothing but a fraud and another "champion" built on performance enhancing drugs.

Second, The Baseball Writers' Association of America failed to elect any player to the Baseball Hall of Fame for the first time since 1996. In a year where the all-time home run leader, a 7-time Cy Young award winner and other notable first time candidates were on the ballot, the results of the voting would normally be a slam dunk for Bonds, Clemens and a few others. But the ugly truth of performance enhancing drugs hangs over these candidates and none of them came even close the requisite 75% of votes to get into the Hall. And why should they. They, like Lance Armstrong, perpetrated one of the most massive frauds ever heaped upon sports fans. Fans drooled over the supernatural achievements of Clemens, Bonds, Sosa et al, only to find out that the achievements really were not natural. Fans tuned in game after game, and hung on every pitch that Bonds faced in his quest to surpass the all time HR record set by prior cheater Mark McGwire. All of it was built on lies and deceit.

Now, not only are some of baseball's greatest records tainted forever, we are forced to read about it and hear about it day after day, and year after year, on sports talk radio and in our newspapers. With discussions now turning to whether the Hall might change it's voting criteria to enable these fraudsters to be elected more easily (perhaps with an asterisk), there is no light at the end of the tunnel on this sad story.

Third, NHL hockey is back for a 48 game sprint to the Stanley Cup playoffs. Euphoria abounds (at least in some places). But that feeling was short lived here in Toronto when it was learned that the team's GM Brian Burke was removed from his position prior to the team even being able to open it's training camp. Four straight days of media coverage of the Burke firing filled the airwaves and sports pages in Toronto. Burke, who once likened Toronto to being hockey's equivalent of the Vatican, learned that it isn't a lot of fun being the Pope in a sea of disbelievers. The hockey story in Toronto for the four plus years of Burke's tenure has more often than not been about Burke's approach and personality than the Maple Leafs hockey team itself. He often sparred with the media and was the centre of controversy, with all of it playing out in the media.

Finally, just today a story broke about Manti Te'o, the celebrated linebacker for the Notre Dame Fighting Irish, who won a boat load of awards this year in NCAA college football. He too inspired a nation of college football fans by playing just hours after the reported death of both his grandmother and his girlfriend. Not so fast, turns out that the girlfriend never existed. NEVER EVEN EXISTED! So Te'o has either been the victim of an elaborate hoax or sports fans have once again been duped.

Sunday, 16 December 2012

Finally, the end game may be upon us. For the NHLPA, it is time to play the "disclaimer" or "decertification" cards. The NHL Owners, having seen this movie in the recent NBA and NFL negotiations, have made their pre-emptive strike by filing a lawsuit to have the ongoing Lockout declared legal and by filing an unfair labour practice charge with the National Labor Relations Board in New York. Similar type actions in the NBA and NFL spurred negotiated CBA settlements shortly thereafter. One can only hope.

At this juncture, the Owners should pause for a moment before following through with this next page in their Lockout playbook and ask themselves, to what end? Having already succeeded in beating the Players down to a 50% share of revenues, the battle has been won; but by refusing to compromise on the three remaining issues the Owners say they must have, the Owners may end up losing the war by so alienating the Players, hockey fans and some of the NHL's business partners?

The NHL won't budge off of its position on the length of the CBA and the maximum length of Player contracts. But whose interests among the 30 Clubs is the League fighting to protect in clinging to these positions? And what is its objective in doing so?

Do the General Managers of each of the 30 independent member Clubs of the NHL need to have their hands tied by such a restrictive rule on the length of contracts? Do supposedly sophisticated business people who buy, own and operate NHL teams need to be restricted from signing a Player to an 8 year contract as opposed to a 5 year contract? People lose sight of the fact that no one is forcing any General Manager to sign any Player for any length of contract.

And do the many, many Clubs that don't need this type of restriction want to have their businesses shut down for an entire year to accommodate the few that might want it? The NHL doesn't operate the sport of hockey in a vacuum. It is competing for the discretionary dollars of the sports and entertainment consumer, and that consumer has plenty of other excellent options for spending his/her money. The longer the NHL is shut down, the more those dollars get spent on other entertainment options. The casual fan, and there are lots of them in the non-traditional hockey markets, may just get hooked on those other options and not come back.

Notwithstanding that, the League seems insistent on getting a deal with the Players that is geared to the lowest common denominator of its Clubs, even though those Clubs that may purportedly benefit from such restrictions can hardly be said to be critical to the success of the NHL. In fact, a persuasive argument can be made that the League would be far better off without its weak sisters.

Without picking on any team in particular, what incremental economic benefit has the Florida Panthers brought to the business of the National Hockey League as a whole? Nashville? Phoenix? Columbus? The defunct and relocated Atlanta Thrashers? Once upon a time, the League calculated that it needed to have teams in these markets to establish a greater national television footprint and then the holy grail of a large national cable TV deal would be theirs. How did that work out?

Many of those markets have turned out to be the most challenging for the NHL. The League has had to expend much time, effort and money - often to its embarassment - in dealing with ownership and other issues in those markets. So why do large and whole parts of NHL seasons need to be sacrificed for CBA rules purportedly designed to protect those teams? 5 year maximum contract lengths are not going to solve the ills that plague the teams in those troubled markets. Why must Clubs that are thriving in legitimate hockey markets lose 10% of their games over the duration of Gary Bettman's tenure as Commissioner, just so they can continue to try to prop up Clubs in weak hockey markets?

Is the League still trying to achieve greater parity among its teams? If so, that would be strange as the NHL has consistently trumpeted the fact that they already have great parity in the NHL. And the irony in having greater parity is that, in the bigger picture, the League is arguably worse off by having it. Television ratings for Stanley Cup Finals are traditionally weaker when the smaller market teams make it to the Finals. The Ottawa vs. Anaheim final in 2007 was the lowest rated Stanley Cup Final in the past 15 years. The final between Edmonton and Carolina the year before was the second lowest over that time frame. So even if the NHL has been successful in winning the parity battle, it is doing so to its own detriment. The large traditional hockey markets are the ones that bring in the biggest ratings.

So instead of negotiating and compromising, why ramp up the law firms and go scorched earth over the few remaining issues in the CBA?

Is the League just trying to crush the Players in this battle? Is it trying to show Don Fehr that he isn't going to ride in on his white horse and show the League who is boss? Even if the League wins that battle, is it worth leaving the Players so embittered that they will come out of this process feeling more and more like the "cattle" that some League executives have portrayed them to be? Is this "win-lose" approach that the NHL and its lawyers seem to so lovingly embrace negotiation after negotiation a good strategy for running a successful business? Does a well run business choose to trample on its employees when they are down, disregarding the fact that those same employees are the talent whose performance is critical to the success of the business?

The League needs to look beyond its hostility towards Don Fehr and the Players. Winning individual battles doesn't mean the NHL will win the war; especially when the war is not with the Players but instead with the numerous other sports and entertainment events competing for fan dollars. For a group of business people who are supposed to be so business savvy and accomplished in their other lines of business, I can't help but thinking the Owners just can't see the forest for the trees.

Saturday, 8 December 2012

The "theatre" that is known as the NHL collective bargaining negotiations reached a crescendo on Thursday night with the animated NHL press conference where Gary Bettman almost blew a gasket while addressing the media. I had to chuckle when TSN broke away from regular programming to cover the press conference live as though it were some seminal moment in World history akin to Neil Armstrong walking on the moon. We really need to get a life here in Canada.

That all said, it was very interesting to me that one of the key things that came out of this week's failed attempt to reach a new collective agreement was Bill Daly's comment that the League's insistence on a maximum 5 year contract length (7 for teams signing their own free agents) is"the hill we [the NHL] will die on".That was a curious comment, both for the conviction with which it was made, but more interestingly if one asks why the League thinks the issue is worth dying over.To me, the tone of Daly's voice was borne out of utter frustration with the state of the negotiations, but more importantly the League was trying to send a very public message directly to all Players, particularly about the 5 year contract limit. On its face, how many of the NHLPA members are actually going to be concerned by whether contracts can be more than 5 years? That is not to say that a 5 year contract limit will not have an impact on player salaries, but that impact is something that is more esoteric and difficult to accurately explain or predict to the majority of NHLPA members. The NHLPA is saying it will gut the middle class, and likely has lots of neat illustrations as to why that might be the case. Maybe, but as we have seen from the last two collective bargaining agreements, things turn out vastly different once the Clubs start competing for players and start "working" the CBA for their own self interests. So is the contract limit issue a hill the players really want to die on?
On a substantive basis, why is the 5 (or 7) year limit so important to the Owners? Originally, I thought the position was based on the Owners wanting to eliminate the back-diving long term contracts that Clubs and Players structured to work the salary cap to their benefit. But the so-called "evil" of those contracts could be easily addressed by a compromise position. Set the limit of the length of the contract based on the Player's age at the time he signs his contract. For example, (i) age 20-24: 8 years, (ii) ages 25-27: 7 years, (iii) age 28, 6 years, (iv) ages 29 or older, five (5) years. This (or a similar) compromise, combined with the League's insistence that year to year salaries not vary by more than 5% under the contract, should protect against any of the "back-diving" problems in the expired CBA. At the same time, it would allow Players to continue to secure long term deals of more than 5 years to be played throughout their prime playing years.

But if it isn't just the back diving contract issue behind the League's purported insistence on 5 (or 7) year limits, what is it that is worth dying over? The first thing that jumps out is the simple issue of guaranteed contracts. The Players have enjoyed, as they rightly should, the benefit of contracts that are guaranteed for their full term in the event of injury. By limiting Clubs to signing only 5 (or 7) year contracts, the Clubs will be protected from putting themselves under long term liabilities to Players who can't play due to injury (e.g. Rick Di Pietro). However, the Clubs already mitigate this risk by taking out disability insurance policies on a handful of the highest paid players on their Clubs. In my time working at the NHLPA, this was a mandatory requirement that the League placed on each Club.

Second, the contract term limit, combined with the 5% variance restriction, may even the playing field a bit between large market and small market teams competing to sign free agents. The large market clubs can financially afford the mistake of signing a very long term deal if the Player ends up injured or simply loses skill much more than a small market team can. In addition, the universe of comparable contracts raised in a negotiation becomes much smaller and more standardized.

Based on all that, is the strict 5 year limit really a hill the NHL will die on if push comes to shove in January? Is the issue important enough to the vast majority of Club owners to cancel an entire season? Is the issue important enough to them to go through the uncertainty of what might result from a potential decertification by the NHLPA and anti-trust lawsuits? Is the issue important enough to them to risk the potential damage a lost season (or more) might have on business relationships with League and team sponsors. In my opinion, the answer is no. And I think that is what the NHLPA is banking on as well.

Wednesday, 24 October 2012

I get asked frequently for my thoughts about the ongoing NHL collective bargaining negotiations. I don't have a crystal ball and, like Don Fehr, have been out of the prediction business for a long time now. That being said, I follow what is going on and do like to play around with the "what if's" in the back and forth between the two sides. A big part of me thinks that overall, the NHL Clubs (large and small markets) would generally be better off on an overall economic basis without the current cap system. Free markets tend to work better in my view and avoid the need for all the complex mechanisms and rules that are layered into an artificial Cap economy - and which are bogging down these negotiations. But a return to a free market system is not going to happen under Bettman's watch so discussion over on that front.

The NHL has left its latest offer open as the last chance for the parties to save a full 82 game season if the two parties can dot all the i's and cross all the t's this week. There has been some speculation that this remains possible given that (1) the NHL offer purported to address (but didn't really) one of the main "hot buttons" for the Players - namely, honouring all existing Player Contracts, and (2) one of the Players' counter proposals spoke of accepting a 50/50 split of revenues if the NHL otherwise agreed to maintain all the current "player contracting" issues the way they are currently dealt with in the expired CBA. Although the League immediately shot that counter proposal down, let's pretend that we can use those two positions as a jumping off point for a settlement.

Think of the business points that are being negotiated as being a series of concentric circles. The centre point is the Players' overall share of the pie or the so called Players' Share of hockey related revenue ("HRR"). That's what the main fight is obviously all about. The other aspects of the League's proposal are the concentric circles around it, which the League designs to compress the Players' Share (of HRR). Think of all those "player contracting" circles as having inward pointing arrows pressing down on the Players' Share in the innermost circle. We used to call those other CBA "contracting" elements "drags" on salaries because the League hoped that they would drag down the amounts that Clubs would otherwise be permitted to pay players. They really are, in many (if not all) respects, rules designed to prevent the Clubs from hurting themselves.

Set out below is a revised version of the NHL offer with some cutting and slashing, as well as some additional ideas that provide some food for thought in resolving some of the player contracting points. If a compromise is only attainable with some ongoing "drags" in the system, then there are many ways to skin that cat. Some "COMMENTS" are included to provide some of the rationale for the changes but in many cases that rationale should be self-explanatory.

The revised proposal is accompanied by a table at the end showing the impact of using different percentages for the Players' entitlement to a share of future HRR growth if the parties choose to transition to a 50/50 split of HRR over the term of the new CBA while honouring all the existing player contracts. Those examples may be a bit simplistic but the capologists on each side can figure out how to tweak them to make them work. So here we go....

COMMENT: The following is an idea on how to settle the split of HRR between Players and Clubs, going forward, including as a key component, some additional required revenue sharing from the growth of HRR.

For example, if HRR was $3.782 billion in 2013/14 (based on 7% per annum growth in first two years of new CBA), and the IPS were to be increased by 20% of $479MM (3.782B –3.303B) or $95.8MM (call this the “Adjusted Player Share” or “APS”). effectively, the Players’ % share of HRR for the 2014/15 season will then be 52.3% (1.883B plus 95.8M (for a total APS of $1.9788B) divided by 3.782B).

IV.The percentage of HRR that the Players would be entitled to receive will never be allowed to be less than 50% for any season and would be set at that level once the Players’ share of HRR effectively reduces to 50%.

COMMENT: The issue of very long term, back-diving contracts, does not affect that many Players directly at this time. They should be grandfathered under the new CBA and should not be accounted for on a punitive basis.

All new SPCs with terms in excess of five (5) years will be accounted for and charged against a team’s Cap (at full AAV) only for those Players that are currently included for the purposes of the expired/current CBA. In the event any such contract is traded during its term, the related Cap charge will travel with the Player, but only for the year(s) in which the Player remains active and is being paid under his NHL SPC. If, at some subsequent point in time the Player retires or ceases to play and/or receive pay under his NHL SPC, the Cap charge will automatically revert (at full AAV) to the Club that initially entered into the contract for the balance of its term.Money paid to Players on NHL SPCs (one-ways and two-ways) in another professional league will not be counted against the Players’ Share, but all dollars paid in excess of $105,000 will be counted or against the NHL Club’s Averaged Club Salary for the period during which such Player is being paid under his SPC while playing in another professional league.In the context of Player Trades, participating Clubs will be permitted to allocate Cap charges and related salary payment obligations between them, subject to specified parameters.Specifically, Clubs may agree to retainallocate Cap charges and related salary payment

COMMENT: Salary arbitration has not been a major factor in the current CBA and shouldn't be viewed as an issue to hold up a settlement.

Maintenance of existing Group 3 UFA eligibility rules, subject to the following changes:

COMMENT: The following rules are designed to provide some protection to Clubs vis-a-vis Group 3 Players but recognize that (1) the free agency rules in the NHL continue to be the most restrictive of any of the Big 4 pro leagues, and (2) the Group 3 rules in the expired CBA were a big part of the Players' compromise for a cap system in 2005.

COMMENT: this compromise should largely protect against any of the "back-diving" problems in the expired CBA, but allows Players to continue to secure long term deals of more than 5 years in their prime years.No Limit on year-to-year salary variability on multi-year SPCs -- i.e., maximum increase or decrease in total compensation (salary and bonuses) year-over-year, except for players signing at age 31 or older.For that category of player , variability limited to 5% of the value of the first year of the contract. (For example, if a Player earns $10 million in total compensation in Year 1 of his SPC, his compensation (salary and bonuses) cannot increase or decrease by more than $500,000 in any subsequent year of his SPC.)

· NHL commits to Revenue Sharing Pool of $200 million for 2012/13 season (based on assumption of $3.303 Billion in actual HRR). Amount will be adjusted upward or downward in proportion to Actual HRR results for 2012/13. Revenue Sharing Pools in future years will be calculated proportionately. Revenue Sharing will also be adjusted as per point 3 above to allocate a set portion of the Clubs' entitlement to HRR growth to additional revenue sharing.At least one-half of the total Revenue Sharing Pool (50%) will be raised from the Top 10 Revenue Grossing Clubs in a manner to be determined by the NHL.At least x% of the total revenue sharing pool shall be paid to the bottom "X" (to be agreed) Revenue Grossing Clubs on an equal basis.The distribution of the Revenue Sharing Pool will be determined on an annual basis by a Revenue Sharing Committee on which the NHLPA will have representation and input.For each of the first two years of the CBA, no Club will receive less in total Revenue Sharing than it received in 2011/12.

Current “Disqualification” criteria in CBA (for Clubs in Top Half of League revenues and Clubs in large media markets) will be removed.Existing performance and “reduction” standards and provisions relating to “non-performers” (i.e., CBA 49.3(d)(i) and 49.3(d)(ii)) will be eliminated [and will be adjusted as per the NHL’s 7/31 Proposal. – need to confirm what this entailed].8. Supplemental and Commissioner Discipline:Introduction of additional procedural safeguards, including ultimate appeal right to a dedicated “neutral” third-party arbitrator with a “clearly erroneous” standard of review.(to be mutually appointed by NHLPA/NHL on same terms as grievance arbitrator)for any discipline involving a suspension of more than 4 games .

9. No “Roll Back"

The NHL is not proposing that current SPCs be reduced,re-written or rolled back. Instead, the NHL’s proposal retainsall current Players’ SPCs at their current face value for theduration of their terms, subject to the operation of theescrow mechanism in the same manner as it worked under theexpired CBA.